Private equity firms hired some big guns to sell their buyout of TXU Corp. None was more respected than James Baker, former secretary of state, treasury secretary and chief of staff to two U.S. presidents.

Baker had been an envoy to Africa and the Middle East not long before he was campaigning for the buyout. At an editorial board meeting, the then-76-year-old statesman was asked a question: Why, at that stage of his career, was he hawking a private equity deal?

Baker lifted his right hand and rubbed his thumb against his fingertips, making the universal symbol for money.

It was a candid, revealing moment from a buyout team that had largely stuck to talking points and calculated concessions.

If you want the real reason that Texas’ largest power company is now on the verge of bankruptcy, Baker got to the root of it all.

He also got 1 million shares of restricted stock for helping close the deal.

Most acquisitions have a strategic rationale. Buyers may want to add talent, technology, physical assets or new customers. But Energy Future Holdings was always all about the money. It was driven by debt, leverage and faith in financial engineering.

The timing was right, too. Before the Great Recession, credit was easy, and transactions meant profits. Who worried about covering the bills when prices were climbing and refinancings were plentiful?

KKR, TPG and the private equity unit of Goldman Sachs announced the deal in early 2007. The largest leveraged buyout ever, valued at more than $45 billion, closed about a year before Lehman Brothers failed and the subprime crisis exploded. And the federal government had to start bailing out the economy.

Betting the farm

The blame for EFH can be spread around. Most states would never have permitted such a takeover of their largest power company. Pension funds, investment firms and investors like Warren Buffett put up most of the money that enabled the risky bet.

And Texas lawmakers, who were in session in Austin, were won over by Baker and others, including former Dallas Mayor Ron Kirk. TXU and the private equity firms hired 86 lobbyists and spent $17 million on the cause, according to a watchdog group.

But the deal makers, KKR, TPG and Goldman, bear the responsibility for the busted buyout. They almost quadrupled the debt, betting the farm on higher natural gas prices.

A year before the leveraged buyout, the company paid $830 million in interest. The year after, interest expense hit almost $5 billion.

Maybe EFH could have handled that if revenue had been soaring. But the recession and falling gas prices pushed revenue down, not up.

The year before the buyout, TXU spent less than 8 cents of every revenue dollar on interest. In 2012, interest took 62 cents of every dollar.

The future looks even worse. In the next four years, EFH has $35.5 billion in principal and interest coming due, according to data from Bloomberg. With no prospect of refinancing, bankruptcy is the only option.

This outcome is not a shock. Soon after the deal was announced, Moody’s Investors Service warned of extraordinary risk and devastating effects. Analyst Jim Hempstead wrote that it was not clear how EFH would cover the debt without big increases in power prices.

He said the company didn’t have “a sufficient amount of cushion to withstand unexpected, negative events.”

Volatile gas prices

The shale gas revolution was one of those events. EFH officials have cited the deep drop in natural gas prices as the source of their problems. But commodities are notoriously volatile, and TXU execs had doubts about the buyers’ projections.

They urged shareholders to accept the buyout, in part, because they didn’t see as much upside in natural gas.

EFH’s slow and sure demise hasn’t required government intervention so far. That’s a tribute to the design of the state’s deregulated electricity market.

While bond investors will lose about $15 billion, the damage won’t hit ratepayers. There’s also been no interruption in power and none is expected, which is crucial, given EFH’s size.

Its Luminant unit provides about 18 percent of electricity to the power grid. Oncor’s wires and poles reach almost 3.3 million customers, and retailer TXU Energy has 1.7 million customers. Together, they have about 9,900 employees.

KKR, TPG and Goldman deserve credit for preserving operations and living up to the original deal points. The company added jobs, cut prices for legacy customers and made billions in new investment.

But it’s been practically locked in amber since 2011, dominated by debt. When the deal was proposed, state officials worried about the buyers flipping the property.

A few years earlier, TPG and KKR were part of a group that sold Texas Genco, a collection of power plants around Houston. They netted almost $5 billion in little more than a year.

State officials were worried about a repeat, so the private equity guys pledged to hold EFH for at least five years. This time, they’ve stayed too long.